White House deal with drug firms draws flak

An $80-billion pact with the pharmacy industry intended to advance the administration's healthcare reform goals has instead created confusion and discord.

WASHINGTON — An $80-billion deal with the drug industry that the White House thought would add momentum to its campaign for national healthcare reform has instead provoked a political tempest, frustrating and bewildering some of the president's most important allies.

"I've heard a lot of confusion about what was agreed to," said Rep. Henry A. Waxman (D-Beverly Hills), chairman of the House Energy and Commerce Committee, who wrote healthcare legislation that would impose more cost on the industry than that contained in the White House agreement.

Under the deal, the Pharmaceutical Research and Manufacturers of America, or PhRMA, agreed to provide $80 billion in cost savings over 10 years. It also promised to promote healthcare reform in a multimillion-dollar ad campaign. In return, the White House agreed to consider the $80 billion as a cap on PhRMA's costs in the overhaul legislation. In addition, the White House agreed not to require rebates on sales of commonly prescribed drugs to patients enrolled jointly in Medicaid and Medicare.

Separately, the White House told PhRMA executives that legislation the industry has long opposed to permit importation of cheaper drugs from Canada and Europe would probably not be necessary if a healthcare overhaul bill passed.

The drug industry's chief lobbyist, PhRMA President W.J. "Billy" Tauzin, said the unwritten agreement was reached with Democratic Sen. Max Baucus of Montana, chairman of the Senate Finance Committee, and was closely monitored and "blessed" by the White House.

Since the agreement was announced June 20 -- with President Obama saying, "We are at a turning point in America's journey toward healthcare reform" -- critics from the left and right have criticized the accord. Business and conservative interests are angry that one of their most important traditional allies -- PhRMA -- is now working with Democrats to build support for the president's plan. Liberals say Obama gave away too much to the industry.

House Speaker Nancy Pelosi (D-San Francisco) said wryly that she thought if PhRMA agreed to $80 billion in savings, it was likely that real savings could probably be twice that amount. She suggested that the House might not honor the White House-PhRMA-Senate deal. Sen. Bernie Sanders (I-Vt.) said that when he read news accounts suggesting that the White House had told PhRMA it would not pursue Canadian drug importation, he sought and received assurances from White House Chief of Staff Rahm Emanuel that there was no such deal.

After that conversation, however, White House healthcare spokeswoman Linda Douglass confirmed to reporters that the White House had discussed the importation provision with worried drug company executives, telling them that "health insurance reform that lowers costs, including pharmaceutical costs, would probably make such legislation unnecessary." Sanders views that as a dubious assumption and says he intends to continue to pursue the provision.

Waxman became concerned about other reports of what was in the agreement, in part because he feared it might undermine aspects of his healthcare bill. In an interview this week, he expressed alarm about Tauzin's claim -- since revised -- that the deal included a promise not to have Medicare seek further drug price discounts.

"It's ridiculous to have a program in which Medicare spends millions of dollars with drug companies as a customer and does not get a better deal on pharmaceutical prices," Waxman said.

After first declining to comment, the White House now says the topic did not explicitly come up in discussions with the industry.

"I think a lot of people in the room walked away with a different understanding of what was agreed to," Waxman said.

Tauzin, a former congressman from Louisiana, believed that he had an understanding that there would not be negotiations over Medicare drug prices in the future. Currently, government negotiations for lower prices are banned in the Medicare Part D program under a "noninterference" clause that the industry lobbied for several years ago.

This week, Tauzin's top aide at PhRMA, Ken Johnson, reiterated that view but said it was time to stop public discussions about whether it came up in the closed-door White House meetings.

From the time the industry was first asked to participate in crafting healthcare overhaul legislation, Johnson said that Tauzin told everyone: "We'll do everything we can to help. But we will not support price controls, because they will hurt patients by drying up research and development needed to find new cures, and they will kill jobs in a very fragile economy."

Tauzin thought the White House and others understood that meant there would be no change in the government prohibition on price negotiations for drugs. "We thought there was an underlying assumption on that key point," Johnson said.

At this stage, he added, "it's counterproductive to keep talking about it."